Cardinal Health (NYSE:CAH) Will Pay A Dividend Of US$0.49

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NYSE:CAH

Cardinal Health, Inc.’s (NYSE:CAH) investors are due to receive a payment of US$0.49 per share on 15th of April. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.

See our latest analysis for Cardinal Health

Cardinal Health’s Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Cardinal Health’s profits didn’t cover the dividend, but the company was generated enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don’t think there is much reason to worry.

The next year is set to see EPS grow by 90.9%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 54% which would be quite comfortable going to take the dividend forward.

historical-dividend
NYSE:CAH Historic Dividend February 12th 2022

Cardinal Health Has A Solid Track Record

The company has an extended history of paying stable dividends. The first annual payment during the last 10 years was US$0.86 in 2012, and the most recent fiscal year payment was US$1.96. This means that it has been growing its distributions at 8.6% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend Has Limited Growth Potential

Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. However, initial appearances might be deceiving. Cardinal Health’s EPS has fallen by approximately 14% per year during the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It’s not all bad news though, as the earnings are predicted to rise over the next 12 months – we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Cardinal Health’s Dividend

In summary, while it’s good to see that the dividend hasn’t been cut, we are a bit cautious about Cardinal Health’s payments, as there could be some issues with sustaining them into the future. The company has been bringing in plenty of cash to cover the dividend, but we don’t necessarily think that makes it a great dividend stock. We would probably look elsewhere for an income investment.

Investors generally tend to favor companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analyzing stock performance. For instance, we’ve picked out 5 warning signs for Cardinal Health that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.